Blockchain transactions: how do they work and how to control them?

Satoshi Nakamoto the creator of Bitcoin published an article "Bitcoin: a peer-to-peer electronic payment system" in 2008 and introduced a radically new way to exchange money. From then on, the need for a third party, like a bank or another financial institution, simply disappeared. Indeed, this has become a new financial revolution.

Today we will talk about how blockchain transactions are conducted from a technical point of view, how reliable they are, what features they have and how they can be monitored.

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(click on the topic to scroll to it)

  1. How does the blockchain in general?
  2. How are transactions organized? [19659009] What characteristics do blockchain transactions have?
  3. How to test a blockchain transaction?
  4. The reasons why transactions can block
  5. Conclusion

1. How does the blockchain in general?

We should start with the fact that Bitcoin is the first completely digital currency. Unlike electronic money, it does not even exist as a digital file. It is a huge flow of data on all transactions that have ever been conducted. Blockchain is presented in the form of a gigantic accounting book, which is available to all participants in the network.

Each transaction is not stored separately, the information is entered in the blocks. Different networks have different block sizes, for example, until recently a block in the Bitcoin network "weighed" 1 MB. But the BitMEX report says that after the introduction of the new SegWit protocol, the average size of a block has increased to 1.06 MB, and some have reached 2 MB.

To get a new block, there are different mechanisms for consent. The most common are:

  • PoW (proof of work). Here, miners must solve a complex cryptographic equation. Then, a new block is added, for which the system rewards the finder with a certain number of coins.
  • PoS (game test). This mechanism involves adding a new block to a user who has a certain number of coins. The more coins a user has, the more likely he / she will generate a new block.

Each successive block stores information on the previous one. Another important feature of the blockchain is its decentralization, since information is stored simultaneously by all participants in the system (miners, master nodes). So, after the block has been added to blockchain, it can not be edited or deleted.

2. How are blockchain operations organized?

As mentioned above, transactions carried out in the blockchain network do not require the participation of a third party. Let's see how this happens in practice.

Let's say you want to transfer 0.5 BTC to another person. Before the system recalculates the balances of the portfolios (not the transfer, ie the recalculation), this transaction will fall into the so-called Memory Pool, the operational memory of all the miners connected to the network. After this, the blockchain transaction must be confirmed by at least 6 different miners. They (the miners) should check the correctness of the transaction:

  • the amount of commission for each byte of information,
  • the physical possibility of adding a transaction to an existing block (if there is still too little space in the block, the transaction is transferred to the next one that has yet to be found).

After these actions, transaction data is permanently entered into the blockchain and coins are credited to the recipient's wallet. [19659031] 3. What are the characteristics of blockchain transactions?

On the basis of the information mentioned above, it is worth highlighting a series of characteristics typical of blockchain transactions:

  • Irreversibility . Because the blockchain system is a decentralized system, it is not possible to influence data that has already been entered in the registry. Therefore, it is impossible to mark the operation already completed.
  • Lack of regulation. Due to the absence of the center from which the system is managed, it is impossible to completely prohibit and stop cryptocurrencies. To do this, you have to destroy all miners' computers.
  • Anonymity . Each blockchain has its level of anonymity, but in any case, even in anonymous pseudonymized networks, such as Bitcoin, for example, the names and surnames of the users are never used for transactions.
  • Reliability . The network algorithm corrects the balance of all portfolios at the same time, but only a user who has a private key can make a transaction from a given portfolio. Subject to compliance with elementary safety rules, it is not possible to break the portfolio. You can lose your coins only because of you. For example, if you send them to the wrong wallet, infect your computer or smartphone with a virus or somehow allow scammers to obtain private keys.

4. How to test a blockchain transaction?

Transactions in the Bitcoin network can be traced on the website www.blockchain.info . To view information about a particular transaction, you must go to this site and enter a unique transaction hash in the search bar. Then the system displays the actual information.

In this service it is also possible to display information on a particular portfolio:

  • transactions in the history (by date);
  • the total number of coins that have passed through the portfolio;
  • the list of all the addresses with which they have never been interactions (inbound or outbound transactions);
  • current balance.

5. The reasons why transactions can block

The main problem with Bitcoin and many other coins is the speed of blockchain transactions. As for BTC, this indicator reaches a sign of 7 operations per second. Previously, when the total number of users was small, this was sufficient. But now, with the growing popularity of the industry, the "line" for the transaction can turn into tens and even hundreds of thousands of unconfirmed transactions. You can view the current list, which is updated in real time, on this service .

Some transactions may even lock up in the memory pool for a long time (up to 72 hours). Which factors influence the transaction confirmation rate?

  • Total pool load .
  • A very small commission . Miners confirm transactions with a larger commission first.
  • The weight of the transaction is too large and simply does not fit the block almost completely filled. In this case, it will be automatically transferred to the next one.

6. Conclusion

The cryptocurrencies have made a real revolution in the financial sector, on a scale that we still can not understand. The number of blockchain transactions grows every year. To allow everyone to use Bitcoin at the same time (such as Visa, for example), it is necessary to resolve the problem with bandwidth.

Transactions with Blockchain have both advantages: the absence of intermediaries, small commissions, anonymity, security and their shortcomings: irreversibility, low return.

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